A Well-Financed Failure

At Tyler Elementary School in Southeast Washington, water poured in from a leaking roof, sending hundreds of children to classes in nearby schools and churches for the last two weeks.

Katherine Grafton guides her Tyler Elementary School first-graders to a nearby church for class. (Post photo by Larry Morris)

At Wilson Senior High School in Northwest, 10th-graders went 11 weeks without an English teacher because bureaucrats downtown would not hire a replacement for an instructor on sick leave.

Inside Patricia Roberts Harris Education Center in Southeast, ninth-graders work with private reading tutors on vocabulary and grammar they should have learned years ago.

What does a school system that has some of the lowest test scores in the nation do with $594 million a year? How do D.C. schools allot $7,389 per student -- among the nation's highest spending rates -- and still wind up short of books, crayons, toilet paper and, in some schools, even teachers?

Interviews with dozens of former and current city and school officials and an examination of hundreds of school documents and memos reveal some answers:

School officials violated federal law by continuing to pay tens of millions of dollars to administrators who had been ordered laid off by the D.C. Council. Two years ago, school officials announced that they had abolished nearly 180 bureaucratic positions -- but school records reveal the cuts included almost 100 teaching slots instead.

School authorities spent $21 million annually to send 1,079 special education students to private schools because the District fails to provide services in its own schools. Their spending rate is five times the national average.

The federal government revoked grants worth $20 million because the system so badly mismanaged grant funds. In one instance, officials spent $1.6 million on unrelated employee salaries, rather than on extra instruction for underprivileged students as required by law.

School officials accomplished all of the spending maneuvers largely through a budgeting and accounting system that employed two sets of books -- one hidden from public inspection. Rung Pham, the former schools controller, acknowledged in an interview last week that senior officials knew they were breaking city laws regulating how public money is spent -- but did it anyway.

"It makes me so mad, because you really feel sorry for the children of D.C.," said Abdusalam Omer, the school system's chief financial officer, hired last summer to clean up the chaotic finances. "There is a lack of passion for children, particularly those who are disadvantaged. . . . There are children in Anacostia who have never been in the Smithsonian [Institution] because there is not enough money for field trips."

Julius W. Becton Jr., new chief executive of D.C.'s school system, found entrenched bureaucracy and unorthodox budgeting mechanism. (Post photo by Michael Williamson)

Now, Julius W. Becton Jr., a retired Army general, has come to embody the hopes of children and parents across a struggling city desperate for quality education in the District's 152 public schools. The D.C. financial control board hired him as chief executive and superintendent Nov. 15 after firing Superintendent Franklin L. Smith. Smith assumed control of a badly failing system 5 1/2 years ago, and by most analyses, produced little in the way of management reform or improvement of student performance.

It is up to Becton and his staff to figure out where their predecessors went wrong and to make fixes for the future. But it is no small task they take on as they face an entrenched bureaucracy and a budgeting system that Omer said was created to obfuscate.

"Did they really set it up this way on purpose? I think so," he said. "It's very clever."

'Ample Resources'

Anyone who first learns about the District's dilapidated public school buildings and the persistent shortages of basic materials might quickly assume the D.C. system has been starved for money. Wrong.

"The school system has ample resources to educate children. It's the management of resources and the lack of any plan or guide on how to use those resources that is the problem," said Jim Ford, the former staff director of the D.C. Council's Education and Libraries Committee.

Every year, the D.C. school system, an independent city agency, receives about $475 million from city funds and more than $100 million from federal grants and private donations.

"Where does the money go?" Omer asked. "The money goes to create a middle-class community. It goes to salaries."

Year after year, the schools employed more people than authorized in annual budgets approved by the D.C. Council and Congress. The extra personnel, according to Omer, cost $50 million from 1990 to 1995, money that should have been spent on textbooks, field trips, athletics, facilities and other student items.

Even former superintendent Smith's harshest critics agree that when he was hired as superintendent in 1991 to reform the system, he confronted an intransigent bureaucracy that valued one thing above all else: jobs.

But Smith didn't stop overspending for personnel. In fact, the practice worsened during his tenure.

In five years as superintendent, Franklin L. Smith didn't stop the school system from spending more on personnel than authorized.
(Post photo by Juana Arias)

In the 1992 school year, Congress approved $429.3 million in local funds for salaries and benefits. Smith's administration spent $9.52 million more on personnel -- taking money away from, among other things, school supplies, student programs and textbooks to make up the difference. The next school year, Smith's administration spent $9 million more than allocated for payroll and benefits, again by taking money from classrooms.

For the 1994 school year, Smith spent $12.5 million more for salaries and benefits than his budget allowed.

The next year, Smith's administration did it again, overspending on excess personnel by $11 million -- and pulling money from other accounts to cover it.

Two Sets of Books

School officials were able to "reprogram" the money to pay unauthorized workers by keeping two sets of books.

One is in the giant Financial Management System, a computerized system used by the entire District government to track budgets department by department. It is controlled by the city's treasurer and chief financial officer.

The second system is controlled solely by the school district's administration. Known as the Resource Management Control and Information System, or REMCIS, it was set up many years ago to help the school system track its spending in detail at its own headquarters.

Omer discovered "there is no relationship" between the congressionally approved budget that is entered into the Financial Management System and the spending recorded in the school district's own computer system. There have been disparities since the 1980s, and they have increased, Omer said.

Just two weeks ago, newly hired school authorities brought in D.C. Inspector General Angela L. Avant to investigate $250,000 missing from a 1995 school fund, according to a school source.

"The public budget was essentially a fiction," said Mary Levy, the counsel and budget analyst for an education advocacy group, Parents United. The school system had so many funds, and Smith reorganized the administration so often that it was "impossible for any outside organization or person to keep track of everything," Levy said.

A 1993 report by then-city Auditor Otis H. Troupe identified eight funds on the school district's private books that were not authorized by the D.C. Council when it passed the system's budget. The accounts included some $26 million in 1991 and $21 million in 1992 -- money that was being used to pay personnel but had been shifted from other categories in the published school budget.

Troupe's report -- which went to Smith, the school board, the mayor and the council -- strongly objected to "appropriated funds being shifted into areas which are essentially hidden and for which disclosure is non-existent." The number of full-time employees being paid "has been drastically understated to the point of an absolute lie told to the City Council and Congress. . . . The statutes say it is illegal to defraud and waste the District's money."

The federal Anti-Deficiency Act states that no D.C. employee may make or authorize an expenditure or obligation exceeding an amount available in an appropriation or fund for the expenditure or obligation. The Home Rule Act states that no amount may be obligated or spent by any officer or employee of the D.C. government unless Congress has approved the amount.

"Any time you overspend your budget allocated by Congress, you are definitely violating the Anti-Deficiency Act, and that was the case for 1994, 1995 and 1996," Omer said.

"Yes, they did violate the Anti-Deficiency Act," said Rung Pham, the longtime controller who was fired in December by D.C. Chief Financial Officer Anthony A. Williams.

Pham said that in one year -- 1994-95 -- he initially refused to pay a $500,000 bill because it would create a deficit and violate the law. "I wouldn't do it until I got a clear message from the top to do it," he said.

Smith canceled an appointment to discuss this and other issues with The Washington Post and did not reschedule or return repeated phone calls seeking comment. He also did not respond to a letter delivered to his home that requested an interview.

By law, the Board of Education also was required to give Congress, the mayor and the D.C. Council "an accurate and verifiable report" every year on the positions and employees in the public school system, including information on salaries and precise job descriptions. School authorities did not file any of the required reports, and the council and Congress did not force them to comply.

The former longtime chairman of the council's Education Committee, 81-year-old Hilda H.M. Mason (Statehood-At Large), had years ago taken a back seat to staff director Ford, an expert number cruncher and analyst on school finance. Mason had lost credibility with many in the education community who were concerned about her sometimes intemperate and unpredictable behavior and her inability to push school reform.

Like Troupe's reports, Ford's annual committee reports -- which foreshadowed the conclusions reached in fall 1996 by the financial control board -- had little impact. Some school board members angrily denounced the reports; others ignored them. And Ford's immediate supervisors, the D.C. Council, did nothing.

"The tendency over the years has been to say, 'Oh, education, that's the school board's responsibility," said Kevin P. Chavous (D-Ward 7), the new chairman of the council's Education Committee. "While we have mouthed the words that education is a priority, we have not acted like it's a priority."

Instead, he said, politics prevailed.

Each city ward has a council member and a school board member. School board members traditionally have used their positions as a stepping stone to council seats. So, council members, in an attempt to reduce the chance of creating political rivals in their own wards, have allowed school board members to take the lead on school matters.

"There was that unspoken agreement," Chavous said.

Jim Ford, former staff director, D.C. Council's Education and Libraries Committee. (Post photo - Aris Economopoulos)

For Ford, it was "extremely frustrating" to have his reports unheeded -- and at times criticized for unequivocal language.

"The council still had oversight responsibility," Ford said. "And year after year, the excess personnel, the overspending, the misinformation and the pattern of lying was brought to the attention of the council."

No Basis in Reality

The District spends about 85 percent of its funds on personnel, close to what many school districts spend. What is unusual is the proportion spent on central office administrators. According to the nonprofit Council of Great City Schools, D.C. schools in recent years had an average of 16 teachers per central administrator, compared with Los Angeles's 60 to 1.

In 1979, the school system had 113,000 students and 511 central office positions, including clerical workers, administrative assistants, deputy superintendents, assistant superintendents, coordinators, directors, assistant directors and other downtown office workers who had little or no contact with children.

By 1992, the school system had lost 33,000 students, but the number of central office positions had climbed to 967. Former superintendent Smith cut several hundred administrators toward the end of his tenure and didn't replace other central office workers who left.

But critics said he didn't trim fast enough.

The financial control board, in a report in the fall that coincided with Smith's firing, said that in the last year of his tenure, the system still employed 900 to 1,400 more people than were authorized.

During each of the last five years, Smith and school board members testified before the D.C. Council during budget hearings and asked for an increase of $40 million to $100 million in the school budget.

But those budget requests weren't based on realistic numbers. In 1996, for example, the board requested $75,000 for garbage pickup even though the actual costs in several previous years had exceeded $1 million annually. Other numbers, the D.C. Council believed, were exaggerated.

Each year the council denied the request, gave the school system even less money than it had the previous year and ordered the superintendent and board to make specific cuts in the central office staff and reallocate the savings to classrooms.

But school officials ignored those orders, Ford said, and acted as if they'd been given the tens of millions they'd sought. The elected school board, as chief policymaker, was supposed to determine how money was spent, but it ceded that power to Smith and his predecessors.

"Don't forget, the board doesn't run the school system," said Erika Landberg, who represented Ward 3 on the school board from 1988 to 1996. "A board is supposed to do oversight, not micro-manage."

Pham, who is looking for a new job after being fired as controller, said he was made a scapegoat for his bosses.

"I was a team player," he said. "I did whatever I had to do," including overspending on personnel and underspending on other items.

Questions About Priorities

In a system facing hard financial choices, Levy and others for years have questioned school officials' priorities, big and small.

For five years starting in 1991, for example, the system spent nearly $2 million on a Values Education Office, which was supposed to promote education that raised "the consciousness level of social issues." Yet even some school board members said it was useless, and it was killed in 1996.

At the same time, programs that seemed to benefit students suffered.

Eugene Williams, a 13-year D.C. school employee, directed a program to give prospective National Merit scholars extra classes and tutoring. National education journals lauded his work. As part of his budget cuts in 1996, Smith abolished Williams's position, ending the program.

Meanwhile, the Board of Education spent well on itself. It allocated $1.4 million for its own use in 1996 -- more than five times the amount Fairfax County's board spent and more than twice what Montgomery County's spent. Until last year, when their $30,000 salaries were halved by the control board, the 11 members -- who work part time -- were paid more than members of any other school board in the country.

Former school board president Karen Shook countered criticism of the board's own funding and oversight of the system, saying year after year that the school system needed more money and had laid off everyone it possibly could, arguments that Smith also made often.

The trouble was that neither Shook nor the rest of the board knew how many students truly were enrolled or how many people the schools employed at any given time or where they worked.

The confusion existed despite an identification system that should have safeguarded against it. Every school system employee is supposed to receive a personnel number that puts the worker on the payroll.

Uncounted Numbers

Yet when Omer arrived to review the school budget and personnel records, he found 1,734 people on the payroll who had no number but were paid nevertheless. Nearly 200 other people -- all of whom were paid -- shared personnel numbers with one or two other people. Personnel number 0058043, for example, was held by people at Webb, Clark and Petworth elementary schools -- and was the basis on which each of the three drew a paycheck.

The system left Omer stunned. "It was totally messed up," he said.

Landberg said recently that the board knew all about the confused personnel numbers. "Dr. Smith told us they were making progress. But we knew the numbers weren't cleaned up yet," Landberg said. Last fall, payroll data showed some administrators classified as teachers, some teachers as administrators and some employees as working at schools that had closed. There also were personnel numbers on the payroll for eight people who were dead.

A memo written nearly two years ago by school budget director George Letsa -- whom Becton fired last fall -- foreshadowed what Omer and the control board would find. The memo was attached to a computerized list of 130 employees who were not authorized to be employed. It said: "The individuals listed . . . appear on the payroll file but are not on personnel and budget files. In other words, although these individuals are being paid, there are no audit trails in our budget and personnel files to document their existence."

Things were so chaotic when Becton took over that his staff found boxes stuffed with overdue vouchers payable to more than 250 vendors who had done business with the system, ranging from a single teacher to the largest book seller in the country. One of the bills alone was for $600,000. "They didn't know how much they owed," Omer said. "Nobody kept track."

Budget and employee staffing matters certainly are not the only problems facing the general. But, according to Omer, the knotted personnel list must be untangled before Becton can begin genuine reform.

During Smith's first year as superintendent, he was asked how many employees he had. He said he couldn't say. Five years later, he still couldn't answer."

Becton said in a recent interview that, based on payroll and an audit, he's come up with an answer: "About 10,461."

"But," he quickly added, "I can't tell you how many of those are dead."